Salary increase stimulates inflation growth

Podgorica, (MINA-BUSINESS) – According to economic and economic diplomacy advisor to the President of Montenegro, Mladen Grgic, the announced increase in salaries will further stimulate inflation growth, negating wage growth and making the economy expensive and unproductive.

“If the announced increases do occur, there would be much to say about the consequences for financial stability, but staying on topic – it will further stimulate the rise of inflation, which over time will negate wage increases, making Montenegro an expensive and unproductive economy,” Grgic said in an interview with the Mina-business agency.

He added that the announcement of significant wage increases further stimulated price growth.

“When you look at our economic indicators, inflation is certainly one of the red flags we should be worried about. In the first four months, we are among the top in Europe – first or second in terms of inflation rate. In April, the EU average was 2.6 percent, the eurozone 2.4 percent, while it was 5.8 percent in Montenegro, at the highest level after Romania,” Grgić said.

He stated that inflation had practically annulled wage growth over the past two years.

“Real wages are lower today than those in January 2022. When you compare nominal wages, you will see that they increased €706 in February 2022 to €828 in April this year, but the real wage in April is around €686. It’s worth noting that real wage actually shows how much goods and services you can afford with the same salary,” Grgic explained.